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Economist Monti to lead Italy out of debt crisis

world Updated: Nov 14, 2011 13:33 IST

AFP
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Former European commissioner Mario Monti moves on Monday to form a new government to lead Italy out of an alarming debt crisis that has shaken the eurozone and toppled his predecessor Silvio Berlusconi.

The 68-year-old economics professor faced his first being test after being nominated on Sunday with the opening of financial markets and a bond auction which will give an indication of Italy's ability to avoid a debt blow-up.

Hong Kong shares were 2.48 percent higher in early trade.

The technocrat's nomination as prime minister has already won endorsements from all of Italy's main parties including Berlusconi's People of Freedom, but formal confirmation of the new technocratic cabinet could take several days.

"Italy must again be and must increasingly be an element of strength, not weakness in a European Union that we helped found and in which we should be protagonists," Monti said after his nomination by President Giorgio Napolitano.

The president said he hoped the new government would be approved with a confidence vote in parliament by the end of the week as it will have to move quickly to implement painful austerity measures and long-delayed reforms.

Monti promised he would act "with urgency" and said he would work with parliament "to get out quickly from a situation which has elements of an emergency but which Italy can overcome with a united effort".

The economist, who officially has a maximum of 10 days within which to put together his government, vowed "to resolve the financial situation and resume the path of growth, while remaining attentive to social equity."

Monti was the former top trust-busting bureaucrat in Brussels who famously took on, and won, cases against US giants Microsoft and General Electric -- and on Sunday European leaders immediately applauded his nomination.

European Commission chief Jose Manuel Barroso and EU president Herman Van Rompuy said the nomination "sends a further encouraging signal ... of the Italian authorities' determination to overcome the current crisis."

In the unlikely event that Monti fails to form a new government, Napolitano would be forced to dissolve parliament and call early elections.

International leaders including US President Barack Obama and French counterpart Nicolas Sarkozy are pushing hard for Italy to move quickly now to form a new government and adopt economic reforms.

The European Union, which together with the International Monetary Fund is auditing Italy's accounts, said it would monitor Italy's reforms and that the country may need to pass extra austerity measures.

A defiant Berlusconi, whose resignation on Saturday after a wave of market panic was greeted by scenes of jubilation in the streets of Rome, meanwhile vowed to make a political comeback saying: "I will not give up."

"From tomorrow I will redouble my efforts in parliament and the institutions to renew Italy," Berlusconi said in a video message broadcast on Italian television in which he also supported the formation of a new cabinet.

The 75-year-old said he had resigned "out of a sense of responsibility".

"I did it to avoid a new attack of financial speculation against Italy. I did it without losing the confidence of parliament. We still have an overall majority," he said of the coalition with which he won elections in 2008.

While Berlusconi did not lose a formal vote of no-confidence, he did lose his overall majority in a budget vote on Tuesday, triggering his resignation.

Hundreds of supporters rallied in front of the ex-premier's residence in Rome, a day after thousands partied in the Italian capital, booing the scandal-tainted premier and dancing in the streets after he stepped down.

Berlusconi on Sunday wrote a letter to a small conservative party saying that he wanted to work on a "path to government" and condemning defections from his coalition as "petty blackmail and opportunism".

A larger-than-life billionaire in power for 10 of the past 17 years, Berlusconi looked visibly shocked as he quit power on a momentous night and said he was "deeply embittered" at the scenes of jubilation.

A defendant in three trials for bribery, abuse of power and using an underage prostitute, he remains a parliamentary deputy and his government retains interim powers until the new cabinet is approved.

Fears of a prolonged political and financial crisis have pushed up Italy's borrowing costs to record levels, setting off alarm bells around Europe and warnings that the Italian economy is "too big to bail".

Reports of Monti's impending nomination helped ease market jitters last week but the toxic mix of a 1.9 trillion euro ($2.6 trillion) debt, an extremely low growth rate and high bond rates has kept investors anxious.